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GOP unveils property tax cut plan

Posted by: Baird Helgeson under Funding, Gov. Mark Dayton, Minnesota legislature, Democrats, Republicans, State budgets Updated: November 14, 2011 - 12:44 PM

Minnesota home and business owners would save $80 million in property taxes every two years under a proposal unveiled Monday.

The plan by state Rep. Greg Davids, chairman of the House Taxes Committee, would target tax relief for homeowners who experienced the largest property tax hikes. It also would cut the property tax burden for business owners by about 18 percent outside the Twin Cities and 4 percent in the metro area.

Davids also wants to begin phasing out the state's share of the property taxes over the next 20 years.

The goal is “to provide more property tax relief for Minnesota business leaders and homeowners, in a more direct way,” said Davids, R-Preston.

Davids’ plan would largely help Minnesota home and business owners outside the Twin Cities, where property taxes have risen fast and where businesses are generally smaller.

Davids made the announcement after touring the state and getting steady criticism for a little-known change that did away with the state-backed market value homestead tax credit, causing many homeowners to pay hundreds of dollars more in property taxes each year.

Legislators from both parties have been touring the state to explain the change, which helped the state beat down a $5 billion projected deficit.

Davids said the property tax relief package was not a response to the criticism or an effort to restore the previous tax credit, a plan Democrats have been pushing. He said the previous system lacked transparency and often put an unfair financial burden on local governments.

Davids said passage of his plan is not assured as state leaders brace for a November economic forecast in a couple weeks that is expected to leave them to tackle a new budget deficit of more than $500 million.

Homeowners who had local property taxes rise more than 12 percent would benefit from Davids’ plan. For those homeowners, the plan increases the percentages of state property tax refunds to 90 percent, up from 60 percent.

Davids acknowledged his proposed system could reward communities that raise taxes most, by dulling the impact of the hikes on homeowners’ tax bills.

“You could make that argument,” he said.

The business property tax reductions would be the biggest help to small companies. The proposal would exclude the first $100,000 in value of business property. The owner of an average business would save about $411 on their tax bill, about 10 percent.

Davids did not outline where the budget reductions would come from to pay for the property tax cuts, but said “it will be a top priority” for House Republicans. Davids has not discussed his plan with the Senate tax leader.

“Everything’s on the table,” he said of possible reductions.

Everything, he later clarified, except higher income taxes.
 

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